Selling a home with owner financing is increasingly a good decision for homeowners trying to sell in a difficult housing market. Buyers with blemishes on their credit are finding it almost impossible to obtain a mortgage, and even buyers with good credit are having trouble. By offering their home for sale with financing built-in, sellers can help to fill the needs of their buyers. In turn, sellers can often command a higher sale price and sell more quickly. If a seller is financing the Sell my house fast jacksonville of a home he owns free and clear (meaning that he does not have a mortgage on the property), he can often achieve a return on his money by financing the property than he can if he sold for cash, and put the money into the bank in a CD.
While every state has its own set of laws that govern residential mortgages, there are normally three legal documents that are signed at every real estate closing. The exception to this rule is when the buyer pays all cash for the house.
The first document is the Deed. This document conveys certain rights to the property from the seller to the buyer. When the rights are fully inclusive, meaning that the rights include the right to own the property legally, to live in the property, to sell the property, rights to the air above, the ground below, water and minerals on the property, and many other rights, the title is said to be given in “Fee Simple”.
If the seller is guaranteeing to the buyer that he has the right to sell the property, this deed is called a “Warranty Deed”. If the seller is not sure he has the unequivocal right to sell these rights to the buyer, he may choose to sell with a “Quit Claim” deed, which merely states that, if he has any rights whatsoever in the property, he is transferring them to the buyer. To illustrate the point, I could sell you the Brooklyn Bridge on a Quit Claim deed – if I have any rights whatsoever to the bridge, I legally give them to you. I could not sell the Brooklyn Bridge to you under a Warranty Deed.
The Deed to the property is signed whenever a property is sold – whether the buyer pays all cash, takes out a mortgage with a lender, or is obtaining owner financing. The next two documents are used if there is financing involved in the sale.
The “Note” describes the payment terms of the buyer. In an owner financing situation, the buyer is merely agreeing with the seller on paper on how he will pay the seller for the property. Unlike a traditional mortgage, these payment terms can vary significantly, depending on the agreement between buyer and seller. The buyer may agree to fixed monthly payments over a certain period of time, or there might even be no payments due until several years have gone by; the payment arrangements all depend on what the buyer and seller have agreed to.
While the Note describes how the buyer will pay the seller for the property, a third document enforces the terms of the note. This document varies greatly from one state to another, but here in Georgia it is called a Security Deed. This document describes the promises made from the buyer to the seller in the Note, and importantly, gives the seller the right to take back the property from the buyer in a foreclosure proceeding if the terms of the Note have not been kept, if taxes or insurance have not been paid, or the property is not being cared for properly.
If an owner financed sale meets your needs, a competent real estate agent or an attorney can help you to draft the documentation required to properly complete this transaction.